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UOB KAYHIAN |
UOB KAYHIAN |
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Tech Manufacturers – Singapore 1H24 Review: Crucial To Be Selective; Top BUYs: FRKN, VMS; Top SELL:
AEM Two-thirds of the tech manufacturing stocks under our coverage reported weaker-thanexpected 1H24 earnings, except for Frencken and Aztech, due to weak customer demand (AEM, Nanofilm, Venture) and slow ramp-up of new plant (UMS). Our top picks are Frencken and Venture given their positive outlook for sequential earnings growth, especially for Frencken which is seeing strong orders from ASML. We also have BUY calls on Valuetronics and Aztech, and SELL ratings on AEM, Nanofilm and UMS. Upgrade the sector to OVERWEIGHT.
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Trip.com (9961 HK) 2Q24: Strong Earnings Beat; Outbound And International Travel Remains As Key Catalyst
TCOM delivered a strong 2Q24 earnings beat. 2Q24 net revenue rose 13.5% yoy to Rmb12.8b and was 47% above 2019 levels, in line with consensus estimates. Non-GAAP net profit was Rmb5b, with net margin expanding 8.5ppt yoy to 39%, beating our and consensus estimates. TCOM guided for 3Q24 revenue growth of 11-16% yoy to Rmb15.3b-16b, in line with consensus estimates. Maintain BUY with a lower target price of HK$534.00 (US$68.00).
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UOB KAYHIAN |
LIM & TAN |
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Public Bank (PBK MK) 2Q24: Sustained By Write-backs And Strong Non-interest Income
Public Bank’s 2Q24 earnings were in line, bolstered by provision write-backs and strong non-interest income growth. Management has also raised its ROE targets for 2024 to >12.5% from 12.0% on improved NIM outlook. Maintain BUY with a higher target price of RM5.35 (1.75x 2025F P/B, 12.5% ROE) as we roll over our target price to 2025. The stock is trading at an attractive 1.0SD below its historical mean and remains an excellent, liquid and quality laggard play within the sector.
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Innotek’s ($0.495, up 0.5 cent) major Artificial Intelligence (AI) customer Super Micro Computer Inc (Super Micro) shares fell on Tuesday (by 2.6%) after Hindenburg Research said it’s short the maker of server equipment, which became a tech-market darling as a major beneficiary of the boom in AI. The stock fell as much as 8.7% after Hindenburg Research’s report, though it pared much of that decline and closed down 2.6%. Hindenburg, the firm run by Nate Anderson, wrote that an investigation into the company revealed “glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues.” Super Micro’s convertible debt also dropped on the news. We understand that Super Micro accounts for about 10-12% of Innotek’s profitability and has been responsible for the doubling in profitability for Innotek’s 1H’24 core profits to near $6mln (although the reported for Innotek was only $3mln for 1H’24 due to $3mln worth of inventory provisions for their Electric Vehicle business segment). We also understand that notwithstanding the allegations by Hindenburg Research, business from Super Micro remains robust and strong for Innotek for July and Aug 2024 and order books remain strong for the rest of the year as well. While we note that it’s a concern, payments remain prompt from Super Micro and management would be monitoring this customer closely for any signs of moderation or deterioration as a result of the latest allegations. Good thing for Innotek is that the company remains in a solid net cash position of $56mln, representing 46% of its current $122mln market cap. Based on our $9-10mln profi t forecast for FY2024, its PE is 12.2x while price to book is 0.7x. Its usual 2 cents dividend translates to a yield of 4%. If we conservatively zeroize Super Micro contribuƟ ons, net profi t would reduce to $8-9mln and its PE would be 14x. We see weakness as another opportunity to “Accumulate” Innotek given that its lossmaking entites in Thailand and Vietnam are expected to turnaround in 2H’24 while Super Micro business momentum and outlook still remain robust. |
| LIM & TAN | |
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Wing Tai Holdings (S$1.26, down 1 cent) has announced its results for the financial year ended 30 June 2024 with total revenue of S$169.2 million, a 64% decrease from the S$476.3 million revenue recorded in the previous year. Net loss attributable to shareholders came in at S$78.7 million as compared to a net profit of S$13.3 million in the previous year. The losses are largely attributed to impairment losses from its development and investment properties from its associated company, Hong Kong Propertes Limited which is non-cash in nature. For the fi nancial year ended 30 June 2024, the Group recorded a total revenue of S$169.2 million as compared to S$476.3 million in the previous year. This decrease is mainly due to the lower contribuƟ on from development properties. The current year revenue from development properties was largely attributable to the progressive sales recognised from The LakeGarden Residences in Singapore and Jesselton Hills in Malaysia as well as the remaining units sold in The M at Middle Road in Singapore. At S$1.26, Wing Tai is capitalized at S$960mln and trades at an undemanding P/B raƟ o of 0.32x. Wing Tai has consistently paid out fi nal dividends of 3cts/share for over a decade, with special dividends depending on the performance of the Group for that year. Despite a weaker performance, FY24 was no different with total dividends of 3 S cts (FY23: 5 S cts), a 2.4% yield. While a huge portion of its losses are due to fair value and impairment adjustments of its investment and development properties in Hong Kong, we note that these losses are non-cash in nature and core business remains profitable. With the rate cut cycle starting, it could provide a boost to property developers which are likely to be among the primary beneficiaries of a dovish monetary policy. Recommend “Accumulate on Weakness”.
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